Taylor
A couple of added points to your great discussion of life annuities.
Every state that I've read about carries a Life and Health Guaranty fund that will protect life (including annuity) insurance holders up to $100,000, but this is typically only for fixed products For example, in Oregon, the guaranty fund specifically excludes all variable products.
Also, some states allow insurers to pass through 'extraordinary' expenses to current life annuity holders. The conditions, as I understand them, must be dire, but I suspect its there to help forego bankruptcy and the state guaranty fund from picking up the tab. Now, I've never read of this having happened, but if my understanding is correct, in states that allow insurers to do this, the lifetime annuity payment truly isn't guaranteed.
And I look at straight life annuities like I look at advertisements for eyeglasses. You've seen the ad that offers the buyer a set of frames and lenses, from their huge selection, for $99.99. But everything else is an add-on option. So by the time you're added the no-line bifocal, the lighter and tougher plastic, the UV coating, the non-polarization, the lifetime warranty, and so on......you're now into the eyeglasses you really want for $400. Simple life annuities do this through the joint survivor benefit, the death benefit, guaranteed period certain, inflation adjustments, a variable componenet, and so forth. But if the consumer has the strength to just say no, then I would agree that a life annuity could well provide the fixed income part of one's investments, providing its a strong underwriter.
BruceM
